Week in Review – March 13-19

This week’s review looks at China and Saudi Arabia’s strengthening cooperation in the energy sphere, Gazprom Neft’s first steps in fracking, Hyundai Engineering’s investment in Iran and Total’s production start at Congo’s Moho Nord oil field.

China and Saudi Arabia Strengthen their relations

Saudi Arabian King Salman visited China, a key stop in the king’s six-week trip to Asia, where he met the Chinese President, Xi Jinping. The world’s biggest oil exporter and world’s second-largest oil consumer are searching to deepen economic ties between them. The outcome of the meetings was the signing of up to $65 billion worth of economic and trade deals in different sectors. Saudi Arabia and China strengthened their energy relationship with more than 20 agreements on oil investments and in renewable energy. China even discussed taking a stake in Saudi Aramco, which at that time was preparing for a public listing. For Aramco, the potential investments fit with its strategy to expand its refining and chemicals portfolio in its bid to diversify assets and secure long-term agreements for its oil.

Hyundai Engineering reported on March 13 that it has signed a $3.2 billion deal with Iran. The company plans to invest in the second phase of the Kangan oil production and refining project in the southwest of the country. The South Korean company has nine months to finance the project, which might be an obstacle because of the persistent reluctance of international banks to engage with Iran. Nevertheless, Hyundai Engineering is determined to go ahead as a spokesman told The Korea Herald, “The project allowed us to spearhead into the Iranian construction market as a lead manager. We plan to do everything in our capacity to clinch additional projects in the future.” The Korea Herald also noted that the deal is the largest signed so far by a South Korean company in Iran.

On March 15, Total announced that it has started production on Moho Nord, the largest project ever developed in Republic of the Congo located 75km offshore Pointe-Noire (see Figure 1). Oil will be extracted and treated on a new floating production unit (FPU) called Likouf and exported via pipeline to the Djeno onshore terminal operated by Total. The project has a production capacity of 100,000 barrels per day. The development is expected to increase Total’s cash flows as well as boost revenue for oil-dependent Congo.